The CIPC warned the boards of the South African Express Airways, South African Forestry Company, South African Broadcasting Corporation, South African Post Office and the Central Energy Fund that they are at risk of being declared delinquent if they fail to address their non-compliance with the Companies Act.
“The CIPC has indicated that it intends to be proactive in holding these companies and their boards to account. Compliance with the law is not optional and directors need to make sure that the companies that they are overseeing are doing so,” said Parmi Natesan, executive of the centre for corporate governance at the Institute for Directors in Southern Africa (IoDSA).
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If a company is found to be delinquent, it will impact its director’s reputation and bring his/her fitness of office into question, which could result in disqualification from the company and prevent them from taking up directorship positions in future.
Natesan pointed out that according to the IoDSA’s 2014 benchmark study, public sector boards are lagging in most areas compared to the private sector boards.
For instance, only 48 per cent of audited organisations obtained an unqualified audit opinion in 2011/2012 while 94 per cent were found to be materially non-compliant with legislation. The CIPC found that a major concern was that of irregular expenditure, pointing to a lack of quality audit committee oversight.
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“The long and short of it is that audit committees have a vital role to play in assisting their boards with discharging their duties as regards to compliance. In the public sector, particularly, audit committees sometimes face several challenges which make it difficult for them to adequately fulfil their responsibilities,” said Natesan.
“As this latest development shows, boards in both the public and private sectors will bear the consequences of their audit committee’s lack of performance, and should thus be looking for ways to improve it such as participating in the Public Sector Audit Committee Forum, a forum created to strengthen Audit Committees in the public sector.”